2023 (2) TMI 596 - HC - Income Tax

Reopening of assessment u/s 147 - notice beyond the period of four years - Reasons to believe - whether there has been any failure to disclose material facts fully and truly by the assessee? - HELD THAT - In the present case although the A.O. has recorded in the reasons that there was failure on the part of the assessee to disclose fully and truly material facts, it failed to identify as to what was that material fact which was not disclosed by the assessee which if so disclosed could have prevented the escapement of income. The alleged failure to disclose appears to be nothing but a statement to somehow overcome the hurdle of reopening the assessment beyond four years. A.O. could have proceeded to reopen the assessment only if he had reason to believe that income had escaped assessment . Even in the present case there appears to be no tangible material with the A.O. as can be seen from the reasons recorded and that the reference was made only to the records of the assessment. It thus appears that between the date of the order of assessment and the date of the issuance of notice, nothing new had happened. There was no new information received by the Assessing Officer nor was any reference made to any new material on record. A.O. was simply attempting to accord a fresh consideration on the issue of deduction under Section 80P of the Act claimed and allowed in favour of the Petitioner. We cannot forget that the order of assessment passed in the case of the assessee was under Section 143(3) of the Act. Petitioner had specifically claimed the deduction u/s 80P which was not only reflected in the return of income but also gone into specifically as can be seen from the notice issued u/s 142(1) of the Act where by the details of various deductions and exemptions along with documentary evidence had been sought for by the A.O., which finally led to the passing of the order of assessment where by while certain disallowances were made in respect to certain items, the claim of deduction under Section 80P was allowed. It is settled law that if a query is raised during the assessment proceedings and the assessee submits a reply thereto, leading to the passing of the order of assessment, a reopening in the absence of any new tangible material would be nothing but a change of opinion - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of reopening the assessment under Section 147 of the Income Tax Act, 1961.
2. Alleged failure to disclose fully and truly all material facts by the assessee.
3. Requirement of new tangible material for reopening the assessment.
4. Concept of "change of opinion" and its implications on reassessment.

Detailed Analysis:

1. Validity of Reopening the Assessment under Section 147:
The Petitioner challenged the reopening of the assessment for the year 2013-14 based on the notice dated 30th March, 2021, and the subsequent order dated 10th March, 2022. The reopening was initiated on the grounds that income had escaped assessment within the meaning of Section 147 of the Income Tax Act, 1961. The court examined whether the Assessing Officer (A.O.) had valid reasons to believe that income had indeed escaped assessment and if the procedural requirements were met.

2. Alleged Failure to Disclose Fully and Truly All Material Facts:
The A.O. contended that the assessee failed to disclose fully and truly all material facts necessary for the assessment. Specifically, the A.O. argued that the interest income derived from investments in cooperative banks was incorrectly claimed under Section 80P(2)(d), which applies only to interest from cooperative societies. However, the court noted that the A.O. did not specify which material facts were not disclosed by the assessee during the original assessment. The court emphasized that a bald allegation without specific details does not satisfy the jurisdictional requirement for reopening beyond four years.

3. Requirement of New Tangible Material:
The court highlighted that for reopening an assessment beyond four years, there must be new tangible material that was not available during the original assessment. In this case, the A.O. relied solely on the existing records without any new information or material. The court referenced the Supreme Court's decision in CIT V/s. Kelvinator of India Ltd., which held that reassessment must be based on new tangible material and not merely a change of opinion.

4. Concept of "Change of Opinion":
The court reiterated the principle that the A.O. does not have the power to review an assessment but only to reassess based on new tangible material. The court cited Jindal Photo Films Ltd. Vs. Deputy Commissioner of Income Tax, emphasizing that a mere change of opinion does not provide jurisdiction to reopen an assessment. In this case, the A.O.'s attempt to reconsider the deduction under Section 80P was deemed a change of opinion, as there was no new material or information.

Conclusion:
The court concluded that the reopening of the assessment was unsustainable due to the absence of new tangible material and the failure to specify undisclosed material facts. The court quashed the impugned notice dated 30th March, 2021, and the order dated 10th March, 2022. The writ petition was allowed, and the reopening of the assessment was deemed invalid.